Ola acquires FoodPanda India business, to further invest $200 million

Saurabh Kochhar, former CEO of Foodpanda India has left the company and Pranay Jivrajka, founding partner at Ola has been appointed as the interim CEO of FoodpandaShashwati Shankar&Supraja Srinivasan | ETtech | Updated: December 20, 2017, 10:06 IST

Ride-hailing player Ola is making an entry into the food delivery space again, this time by acquiring Foodpanda India from Germany based Delivery Hero Group.

While the companies did not disclose the details of the deal size, sources have pegged the stock-based acquisition at under $50 million. The move will also see Ola invest another $200 million, as it takes on rival UberEats and incumbents like Zomato and Swiggy.

According to analysts, Ola has acquired the third largest player in the food delivery business in India and is focussed on broadening its range of services, including the food delivery segment, after Ola Cafe failed to take off in 2015.

Saurabh Kochhar, former CEO of Foodpanda India has left the company and Pranay Jivrajka, founding partner at Ola has been appointed as the interim CEO of Foodpanda and will work with the existing leadership team at the company.

“Foodpanda has come to be a very efficient and profit-focused business over the last couple of years. Our commitment to invest $200 million in Foodpanda India will help the business be focused on growth by creating value for customers and partners. With Delivery Hero’s global leadership and Ola’s platform capabilities with unique local insights, this partnership is born out of strength,” said Bhavish Aggarwal, CEO of Ola in a statement.

According to analysts and employees at the company, Ola faced stiff resistance from users within 3-4 months of Ola Cafe being rolled out in 2015. With a drop in orders, users returned to the likes of Swiggy, Zomato or Foodpanda.

“Ola cab drivers would pick up the food from the partner restaurants and deliver orders that came up when they were driving around the locality. This made a significant dent on the revenue that came from the regular cab rides,” said an employee, speaking to ET on the condition of anonymity. “Ola Cafe also did not allow access to the entire menu from each restaurant, a key reason we expect users lost interest in the service,” the employee added.

According to analysts, Ola is focussed on diversifying its offerings by making an acquisition in the food delivery segment, after lessons learnt on starting up and failing with Ola Cafe in the past.

“The $200 million investment in Foodpanda is not a very high figure, so Ola has made a significant entry into acquiring a sizable portion of the food delivery space through this move. Through this deal it will easily take on UberEats, which is also failing to pick up traction for varied reasons, from customer stickiness to high restaurant commission charges at 30%,” said an analyst, speaking anonymously to ET.

The Delivery Hero Group believes the partnership with Ola, will enable the company to further consolidate markets where it strategically makes sense to collaborated with leading local players. “We consider our stake in Ola as a very valuable asset, while Ola’s investment commitment in Foodpanda India is a clear and confident sign to the Indian market,” said Delivery Hero CEO, Niklas Ostberg.